In light of the continuing risk of terrorist attacks and the fact most insurers do not cover any loss or damage as a result of a terrorist act, to protect the commercial property sector, the Australian Government set up the Terrorism Insurance Scheme (“TIS”) which is administered by the Australian Reinsurance Pool Corporation (“ARPC”). Through this arrangement, the ARPC protects insurance policyholders through premium payments to provide cover in the event of a declared terrorist incident (“DTI”).
Amendments to the TIS
Changes to Australia’s TIS have been approved and will:
- broaden the definition to include buildings with a floor space of at least 20% used for commercial; or
- apply if the building sum insured of $50 million AUD or greater, whether used for commercial or other purposes.
What this means for you
If your insurable property falls within the new definition, you will notice a new terrorism levy on your policy to adequately reflect the terrorism levy charges.
It means that residential buildings over $50 million will now be subject to a Terrorism levy where previously they were not required to contribute to the premium pool.
The shift in commercial floor space from 50% to now 20% means there will now be a number of mixed use buildings, which will now need to contribute a premium.
When does the change take effect?
These changes will take effect from 1 July 2017 and Honan will issue all renewals due on or after 1 July according to the new definition.
How is the terrorism levy calculated?
The applicable levy is set in line with a tier allocation as determined by the ARPC.
Tier Allocation and % levy
The premium is charged by postcode and split into three tiers according to population density.
The ARPC levy is currently calculated as follows:
- Tier A: up to 20% - are those cities with a population of more than 1 million covering the CBD areas.
- Tier B: up to 6% - are those covering the urban areas of all state capital cities, and cities with a population over 100,000.
- Tier C: up to 3% - Postcodes allocated to Tier C are those geographic postcodes not allocated to either A or B.
If you are unclear about these changes or would like more information please contact us or speak with your Account Manager.
Further details are also available at the ARPC website www.arpc.gov.au